State Tax Credit News Briefs – January 2018

Wednesday, January 3, 2018

The Michigan Department of Treasury issued a memo Nov. 1, 2017, reminding taxpayers with certificated credits under the Michigan Business Tax Act ( MBTA) that some of the credits are subject to recapture if the taxpayer fails to comply with the conditions pursuant to which the credit was awarded or sells or disposes of certain property prematurely. Taxpayers should check the MBTA to determine if their certificated credit is subject to recapture. For example, the historic preservation credit is available to a taxpayer that has rehabilitated a historic resource pursuant to a plan approved by the Michigan State Housing Development Authority (MSHDA). However, if the historic resource is sold or disposed of within five years after the historic resource is placed in service, the taxpayer may be required to add back to its Michigan Business Tax liability a specified percentage of the credit amount previously claimed. Under the brownfield redevelopment credit, for multiphase projects, if all components of the project are not completed within 10 years of the preapproval letter, the taxpayer may be required to pay back all credit amounts claimed or assigned for all components. Additionally, taxpayers should regularly communicate with their state partners to the plan or agreement to avoid missing a deadline or failing to comply with criteria upon which the certificated credit was issued. 

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St.  Paul’s United Methodist Church in Cedar Rapids, Iowa, reopened Nov. 19, 2017, after a $4.5 million restoration. Rehabilitation of the 1914 building was made possible with $1.2 million in historic preservation tax credits from the Iowa Economic Development Authority. Work included upgrades to the main entrance, a welcome center, an expanded gathering space, renovations to offices and other rooms, a new space with stage and sound equipment for youth, a renovated nursery and a new gathering area for children’s programs.

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The Iowa Economic Development Authority (IEDA) awarded $19.7 million in historic preservation and cultural entertainment district tax credits Nov. 16, 2017, to 13 historic preservation projects throughout the state. For this registration period of October 2017, IEDA received 24 applications requesting $56 million in tax credits. Approximately $20 million was available. 

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The Tennessee Department of Revenue posted Nov. 30, 2017, Tennessee Letter Ruling No. 17-16 regarding the job tax credit. The department ruled that a service provider was not a qualified business enterprise and was not eligible for the job credit. Tennessee Code requires an entity to be a qualified business enterprise to qualify for the job credit and provides that a qualified business enterprise includes an entity performing computer services. The taxpayer was a service provider that created computer software that was used to assist the service provider in serving its clients. The department ruled that the taxpayer was not a qualified business enterprise that invested in the creation or expansion of computer services. Tennessee Letter Ruling No. 17-16 is dated Oct. 30, 2017.

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The West Virginia State Tax Department issued Nov. 30, 2017, West Virginia Administrative Notice No. 2017-23. The notice sets the dollar amount, as adjusted for inflation, that is to be used in determining whether a “small business” qualifies for the Small Business Economic Opportunity Tax Credit. Effective for tax years beginning in calendar year 2018, a “small business” must have annual gross receipts of not more than $9.5 million. For 2017, the amount was $9.4 million.

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